Centre to put Rs 20,000 crore more as capital infusion in public sector banks this year.

i. The government has decided to infuse capital to the tune of Rs 20,000 crore in public sector banks, Financial Services Secretary Hasmukh Adhia said. 50%, or Rs 10,000 crore of this money will find its way to “weak” banks.

ii. This money is likely to strengthen balance sheets of banks reeling with high non-performing assets and bad loans. In his union budget for the fiscal presented in February, Finance Minister Arun Jaitley had said that the government has earmarked slightly under Rs 8000 crore for capital infusion purposes for the current year.

iii. The finance ministry is setting up a rating system for public sector banks where their performance will be measured. Still in the planning stage, some of the criteria that are under discussion for the rating are the number of Jan Dhan accounts and financial inclusion programmes that banks have implemented, and the quantum of retail advances undertaken by them against their corporate advances.

iv. Under this method, a higher rated bank will enjoy equity support from the government unlike the practice earlier when government used to support the weaker banks with equity erosion.